Tribunal admits CIRP petition against Innovative Studios Pvt. Ltd., appoints IRP, declares moratorium.

The tribunal admitted the petition for initiating Corporate Insolvency Resolution Process (CIRP) against M/s. Innovative Studios Pvt. Ltd., appointed Shri Balady Shekar Shetty as the Interim Resolution Professional (IRP), and declared a moratorium. The IRP was directed to ensure the company remains a going concern and to file progress reports periodically, with the next submission scheduled for 10.05.2019.

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Issues Involved:
1. Initiation of Corporate Insolvency Resolution Process (CIRP)
2. Existence of debt and default
3. Appointment of Interim Resolution Professional (IRP)
4. Moratorium and its implications
5. Respondent's defenses and requests for additional time
6. Legal precedents and statutory provisions

Detailed Analysis:

1. Initiation of Corporate Insolvency Resolution Process (CIRP):
The petitioner, M/s. Karnataka State Financial Corporation, filed C.P.(IB)No.181/BB/2018 under Section 7 of the Insolvency and Bankruptcy Code (IBC), 2016, seeking to initiate CIRP against the respondent, M/s. Innovative Studios Pvt. Ltd., due to a default amounting to Rs. 18,63,07,555.37. The petition was supported by relevant documents, including a qualified Resolution Professional's declaration.

2. Existence of Debt and Default:
The petitioner had sanctioned term loans totaling Rs. 1000 lakhs to the respondent for establishing an amusement and film city project. Despite various repayments and settlements, the respondent defaulted on the loan. The petitioner provided a detailed statement of accounts showing the outstanding debt. The respondent admitted to the debt but cited various difficulties, including economic slowdown and internal disputes, which impeded their ability to service the loan.

3. Appointment of Interim Resolution Professional (IRP):
The petitioner proposed Shri Balady Shekar Shetty as the IRP, who declared his qualifications and willingness to act in this capacity. The tribunal found the petition complete and in compliance with Section 7 of the IBC, thus appointing the proposed IRP to manage the CIRP.

4. Moratorium and Its Implications:
Upon admitting the petition, the tribunal declared a moratorium, prohibiting:
- Institution or continuation of suits or proceedings against the corporate debtor.
- Transfer or disposal of the corporate debtor’s assets.
- Actions to foreclose or enforce security interests.
- Recovery of property occupied by the corporate debtor.
- Termination or suspension of essential goods or services to the corporate debtor.

The moratorium will remain effective until the completion of the CIRP.

5. Respondent's Defenses and Requests for Additional Time:
The respondent argued for additional time to settle the outstanding amount, citing ongoing efforts to raise funds and the impact of a High Court order restraining them from altering share capital. They also contended that the petitioner did not accurately account for payments already made. However, the tribunal found these defenses untenable and noted that the petitioner had already rejected the respondent’s requests through a speaking order dated 22.03.2019.

6. Legal Precedents and Statutory Provisions:
The tribunal referred to the Hon'ble NCLAT's order in M/s Inventive Industries Ltd. Vs. ICICI Bank and the Hon'ble Supreme Court's judgment in M/s. Innoventive Industries Ltd. v/s. ICICI Bank, which clarified the adjudicating authority’s role in ascertaining defaults and admitting CIRP applications. The tribunal emphasized that once a default is established, the application must be admitted unless it is incomplete.

Conclusion:
The tribunal admitted the petition for initiating CIRP against M/s. Innovative Studios Pvt. Ltd., appointed Shri Balady Shekar Shetty as the IRP, and declared a moratorium. The tribunal directed the IRP to ensure the company remains a going concern and to file progress reports periodically. The case was posted for the submission of the IRP’s report on 10.05.2019.

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